The Justice Department let the deadline to appeal the decision pass Tuesday, a day after President Barack Obama hosted gay supporters at the White House and promised to be their "champion." Some activists have complained he has not led on their causes, including ending the ban on gays in the military.

Diane Schroer, a retired Army Special Forces commander from Alexandria, Va., had been offered a job at the Library of Congress when he was a man, David Schroer. The job was rescinded the day after Schroer told a library official he was going to have an operation to become a woman.

The American Civil Liberties Union filed a lawsuit on Schroer's behalf in 2005, and two months ago a federal judge awarded her $491,190 in back pay and damages because of sex discrimination.

The Library of Congress and President George W. Bush's Justice Department had argued unsuccessfully that discrimination because of transsexuality was not illegal sex discrimination under the Civil Rights Act.

"This case put employers on notice that discrimination against transgender individuals is like any other form of discrimination — counterproductive and against our principles as a nation," she said in a statement. But she added that Congress must pass a law preventing "rampant" transgender discrimination across the country.

Justice spokeswoman Tracy Schmaler put the solicitor general's decision not to appeal the ruling in legal, not political, terms.

"The District Court's detailed factual findings, as well as its alternate legal holdings, make this case a poor vehicle to contest the underlying issues," she said.

Schroer is a former U.S. Army colonel who directed a classified group that tracked and targeted terrorists. Schroer retired in 2004 after 25 years of service and worked briefly in the private sector before applying for the Congressional Research Service job at the Library of Congress.

After being offered the job, Schroer had lunch with a Library of Congress official and explained the upcoming surgery. Schroer testified the official called the next day and said the position would not be a "good fit."

The ACLU said the decision not to appeal fits with Obama's campaign promises to protect transgender workers against discrimination and his administration's recent order taking steps to bar gender identity discrimination in federal employment.

"The administration's decision not to challenge this important civil rights ruling is a welcome sign that it intends to live up to its commitment to help end transgender discrimination in the workplace," said Sharon McGowan, a staff attorney with the ACLU Lesbian Gay Bisexual Transgender Project.

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